Maotai Town is located in Renhuai County, Guizhou Province, and the sales of China’s famous liquor Maotai are not only a major source of income for the local area but also a barometer of the struggling consumer market in China and the economic difficulties in Guizhou Province.
According to a report by Reuters on March 2nd, Maotai liquor has been a must-have item for weddings, business banquets, and other important events for decades. However, over the past two years, due to low consumer and business confidence, Maotai liquor sales have been affected. In the weeks leading up to the Chinese New Year, visitors traditionally flock to this mountainous town to purchase white liquor as gifts for the new year, but this year, there was a noticeable decrease in the number of visitors during the Lunar New Year period.
Victor Shih, a political science professor at the University of California, San Diego, stated that Maotai’s strong cash flow is a “strategically important component for helping the Guizhou government repay ever-due debts.”
He added that any reduction in Maotai’s profits would pose problems for the government as they “need this money to pay off debts and keep the government running.”
Listed in Shanghai, Guizhou Maotai, majority-owned by Maotai Group, which is fully owned by Guizhou—China’s second-most indebted province. Therefore, Maotai liquor sales are a primary tool for Guizhou’s employment, income, and debt repayment.
For a long time, Maotai liquor has been considered a barometer of Chinese consumer demand. However, in recent years, Maotai liquor’s retail performance has been squeezed by tight monetary conditions.
“In the past, people used to fly in from Beijing several times a year, spending over 3,000 yuan (412 dollars) on a bottle of Maotai,” said a shop owner from one of the many liquor stores along the river in Maotai Village.
“Now you can buy a bottle for only 1699 yuan, but the environment is too poor, and no one wants to buy,” the shop owner continued.
Persistent market pessimism has caused Guizhou Maotai’s stock price and the prices consumers are willing to pay to lose momentum. Since reaching a historic high in 2021, the company’s value has dropped by nearly half, and the market price of a 500 ml bottle of Feitian Maotai has declined by 22% since early 2024.
Guizhou Maotai declined Reuters’ interview request, and the Guizhou provincial government did not respond to interview requests.
It is certain that Guizhou Maotai’s revenue is not related to the market price of its products but to the ex-factory price paid by its distribution network. According to preliminary results from January this year, Maotai raised the ex-factory price of Feitian Maotai by 20% at the end of 2023 to help its revenue maintain the 15% sales growth target for 2024. However, the sustainability of this growth remains in question.
Estimates from securities firms and company executives suggest that at least 50% of the inventory produced by the company in the past decade has not been consumed but held as inventory, often as an alternative investment.
Some analysts warn that a large-scale inventory sell-off could further impact Maotai’s market and stock prices. UBS Research predicts that by the mid-2025, the market price of Feitian Maotai may fall far below the 2,000 yuan benchmark.
The price drop, in turn, will affect the Maotai brand.
“If you drink Maotai, it means you are important and successful,” said George Liu, a private equity manager in Beijing. “If the price is cheap, then what’s the point of drinking Maotai?”
Ben Cavender, Managing Director of Shanghai-based China Market Research Group, pointed out that Maotai also faces challenges in terms of demographics. “Baijiu (white liquor) traditionally is a drink for older people, and most consumers under 35 really don’t like it,” he said.
In an effort to attract young consumers, Maotai has partnered with several companies to introduce affordable products such as lattes and ice cream, but Cavender stated that these strategies have not had a significant effect.
Apart from employing more than 30,000 employees, Guizhou Maotai contributes one-fifth of the province’s tax revenue and 5% of its GDP.
Guizhou leverages Maotai to increase income and repay debts. By the end of 2023, official debts in Guizhou Province had reached 1.5 trillion yuan, a 26% increase from the previous year, accounting for 72% of GDP.
The broader issue is where Guizhou will find new sources of income given its underperformance in developing industries such as big data centers.